Chapter 12 Investment Analysis and Portfolio Management

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Investment Analysis and

Portfolio Management

Frank K. Reilly & Keith C. Brown

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Chapter 12 – Macroeconomic and Market

Analysis: The Global Asset Allocation

Decision

Questions to be answered:

1. What are the expected and the empirical relationships between economic

activity and security markets?

2. What is the macroeconomic approach to estimating future market returns?

3. What are the major macroeconomic techniques used to project the securities

market?

4. What is the leading economic indicator approach? What are its uses and

shortcomings and can it be used to predict stock prices?

5. What are the expected and the empirical relationships between the growth of

the money supply and stock prices?

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Chapter 12

6. What is meant by excess liquidity and how is it measured?

7. What is the effect of monetary policy on stock prices in the United States and

around the world?

8. What are the expected and the empirical relationships between inflation, interest

rates, and bond prices?

9. What are the expected and empirical relationships between inflation and stock

prices?

10. When analyzing world security markets, what is the relationship between inflation

and interest rates in alternative countries? What is the effect of inflation and

interest rates on exchange rates?

11. How do the basic valuation variables differ among countries?

12. How do stock price returns among countries correlate when considering domestic

returns and returns in U.S. dollars?

13. What factors should be considered when analyzing the outlook for a foreign economy and its

stock and bond market?

14. What is the asset allocation procedure for a global portfolio?

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Economies and Markets

• Ada hubungan yg kuat antara perekonomian

dan pasar saham

• Pasar sekuritas merefleksikan APA yg sdg

berjalan (

going on

) dlm suatu perekonomian

sebab nilai INVESTASI ditentukan oleh

– Arus kas ekspektasiannya

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Economic Activity and

Security Markets

Pasar saham sb suatu indikator yg plng

menentukan (

Leading

)

– Harga saham merefleksikan ekspektasi laba, dividen,

dan tingkat bunga

– Harga saham bereaksi pd serangkaian indikator yg

menentukan (

various leading indicator series

)

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Cyclical Indicator Approach to

Forecasting the Economy

Pendekatan ini berargumen bhw perekonomian agregat berkembang

dan menurun (

expands and contracts

) dlm periode yg terpisah

(

discernable

)

• National Bureau of Economic Research

(NBER)

• Kategori indikator bersiklus (

Cyclical indicator

)

– Indikator paling menentukan (

leading

)

– Indikator saling berpengaruh (

coincident

)

– Indikator berselang (

lagging

)

• Serangkaian gabungan dan rasio-rasio (

Composite series and ratio

of series

)

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Cyclical Indicator Categories

• Leading indicators

– kondisi ekonomi (

economic

series

) yg biasanya mencapai puncak atau batas

bawah (

peaks or troughs

) sblm puncak dan batas

bawa dlm aktivitas perekonomian agregat

• Coincident indicators

– kondisi ekonomi yg

memiliki puncak dan batas bawah yg sulit

bersesuaian (

roughly coincide

) dg puncak dan

batas bawah dlm siklus bisnis

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Cyclical Indicator Categories

• Lagging indicators

– kondisi ekonomi

(

economic series

) yg mengalami puncak dan

pangkal bawah stlh perekonomian agregat

• Selected series

– kondisi ekonomi yg tdk jatuh

ke dlm satu dr tiga kelompok utama tsb

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Cyclical Indicator Approach to

Forecasting the Economy

• Ukuran analitis kinerja

– Indeks transmisi (

diffusion indexes

)

• trend

• Tingkat perubahan

• Arah perubahan

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Cyclical Indicator Approach to

Forecasting the Economy

• Keterbatasan pendekatan indikator bersiklus (

cyclical

indicator

)

– Variabilitas tinggi

– Sifat uang (

currency of

) data dan revisi

– Tak ada indikator (

no series

) yg merefleksikan sektor jasa

– Tak ada indikator yg mewakili perekonomian global

– Perkembangan politis dan internasional tdk dimasukkan sbg

faktor ke dlm (

factored into

) suatu sistem statistikal

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Cyclical Indicator Approach to

Forecasting the Economy

• Leading indicators

dan harga saham

• Seri indikator yg menentukan lainnya

– CIBCR:

• Indeks

Long-leading

• Indeks

leading employment

• Indeks

Leading inflation

– Analisis indikator penentu altenatif tentang inflasi

– Seri indikator penentu internasional

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Monetary Variables, the Economy,

and Stock Prices

• Penawaran uang dan perekonomian

• Penawaran uang dan harga saham

• Likuiditas ekses dan harga saham

– Perubahan persentasi dr tahun ke tahun dlm

penawaran uang M2 disesuaikan unt tabungan

jk pendek (

small time deposits

) dikurangi

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Money Supply and the Economy

• Penurunan dlm tingkat pertumbuhan

penawaran uang telah memicu (

preceded

)

kontraksi bisnis selama rata-rata 20 bln

• Peningkatan dlm tngkat pertumbuhan

penawaran uang tlh memicu ekpansi

ekonomi sekitar 8 bln

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Money Supply and Stock Prices

• Likuiditas ekses dan harga saham

• Likuiditas ekses historis di US

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Monetary Variables, the

Economy, and Stock Prices

• Variabel ekonomik lain dan harga saham

– Petumbuhan dlm produksi industrial

– Perubahan dlm tambahan risiko (

risk premium

)

– Perputaran (

twists

) dlm kurve

yield

– Ukuran inflasi kejutan (

unanticipated inflation

)

– Perubahan dlm inflasi ekspektasian slm periode

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Inflation, Interest Rates, and

Security Prices

• Inflasi dan tingkat bunga

– generally move together

– investors are not good at predicting inflation

• Tingkat Inflasi dan harg obligasi

– Hubungan negatif

– Lbh besar pengaruhnya pd obligasi jk lbh panjang

• Tingkat bunga dan harga saham

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Analysis of World Security

Markets

• Goldman, Sachs & Co.

World Investing Strategy Highlights

• Inflasi dan kurs pertukaran

• Korelasi di antara return

• Perubahan harga saham negara Individual

• Analisis negara Individual

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The Internet

Investments Online

www.ms.com

www.dri.mcgraw-hill.com/index.htm

www.yardeni.com

www.whitehouse.gov/fsbr/esbr.html

www.bog.frb.fed.us

www.phil.frb.org/econ/index.html

www.worldbank.org

www.bankamerica.com/econ_indicator/econ_indicator.html

www.personalwealth.com

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The Internet

Investments Online

www.treasury.boi.ie

www.dkb.co.jp/english/index.html

www.boj.or.jp/en/index.htm

www.indobiz.com

www.bankofengland.co.uk

www.bundesbank.de/index_e.html

www.banque-france.fr/gb/home.htm

www.ecb.int

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End of Chapter 12

The Analysis of Alternative Economies and

Securities Markets: The Global Asset

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Future Topics Chapter 13

• Stock Market Analysis

– Microanalysis of a country’s stock market

– Application of the DDM and the FCFE models

to the aggregate stock market

– How to arrive at an expected market value and

an expected rate of return for the stock market?